June 1^st Tax Rebate Update

For the seventh time since last August, China has once again raised its tax rebates in an effort to help exporters reduce costs and shore up exports. The new tax rebates pertain to more than 2,600 items, including processed farm products, machines, shoes, hats and toys, and will be effective June 1st. This increase reflects the government’s efforts to spur the economy by targeting both domestic consumption and the export industry.

The June 1st export tax rebate percentages are summarized below:

Although exports will not play a significant role in driving up the economy in the short term, stable exports would play a fundamental role in maintaining economic growth, improving resistance against risks and ensuring employment.

In the long term, China will look to improve its industrial structure as well as upgrade its export-oriented industries to spur the economy. The ministry has stated it would increase rebate rates for high-tech and high-value-added industries, while eliminating tax rebates on those that consume too much energy and discharge pollutants. In addition to supporting exports, the government will also put efforts into encouraging domestic consumption and increasing income.

Despite recent signs of exports recovery, especially in textiles and garments, it’s unlikely foreign trade will bottom out in the short term as uncertainties on the world economy, worsening financing environment, trade protectionism and devaluation of foreign currencies all continue to affect foreign trade.